10 Reasons You’re Always Broke (and What to Do About It)

Do you know why you’re broke? Is it because your job doesn’t pay you enough, or you are living beyond your means? Is it because of the student loan that’s hindering your financial growth, or the weakening economy? Truth is many of us are ever broke. In fact, payday has become just like other day.

According to data from the World Bank, a large number of people can barely survive through the month and the gap between the rich and poor is widening in nearly all countries. And unless you take the right measures, you may soon join the ranks of people who survive on less than $10 a day. So, what is really making you broke?

1. Reduced Income

Do you know your disposable income? Many people will make spending plans based on their gross income rather than their net or disposable income. Sadly, they end up spending more than they actually earn.

According to courts statistics, bankruptcy claims by individuals account for 97% of all cases. About 1.5 million individuals are affected every year with a rising number being young adults. You can avoid being part of the statistics by adjusting your lifestyle to your current disposable income. It may mean moving into a smaller apartment or house, disposing one car, taking a second job or reducing your expenditure.

2. Medical Expenses

Do you have medical insurance or you are paying from your pocket? A Harvard University study found that 62% of people filing for bankruptcy were facing huge medical bills. They were paying for themselves, spouses, children, or parents.

The study also showed this trend affected people who already had insurance but had exceeded their limit. You can minimize the medical expenses by choosing the right insurance coverage by shopping around and comparing different providers.

3. Student Loans

Like most young adults you’re probably carrying the burden of your student loans long after graduation. Statistics indicate that 1% (15,000) bankruptcy cases are related to student loans. Due to its less-stringent terms& conditions, many people don’t take repaying the loan seriously.

In fact, they will take-up more loans once employed and completely overlook the student loan. Not only does this become a burden, but also affects your credit rating. The right step to take is starting to pay the loan as soon as you start making an income.

4. Credit Card Debt

Kindly open your wallet or purse and count how many credit cards you have. Chances are you have more credit cards than bills, right? More credit cards mean more problems.

Yes you may have more freedom to spend and higher purchasing power but at the end of the day, you’ll be sinking deeper into debt. How about consolidating all your debts into one main debt? Did you also know that you can talk to some financial institutions who offer this service and have your terms renegotiated?

5. Costly Housing

Many young adults spend more than 30% of their income on housing. Although a person working in New York may fall under the above-average income bracket, he/she will be paying more in terms of rent or mortgage. The end result is many “house poor” average –income earners.

Experts advise such people to look for affordable housing which shouldn’t exceed 20% of your income. Getting a roommate, staying in the city outskirts, or renting a smaller room are some easy ways to avoid going broke to pay rent.

6. Buying Depreciating Assets

Another reason why you’re broke is because you invest in depreciating assets. Yes the car is being sold at a throwaway price, but do you need a third car in your garage? Or maybe you fancy the latest Xbox, PlayStation or iPhone. But why buy it if the current devices are serving you well?

Trying to remain trendy or “keeping Up with the Joneses” will make you broke sooner-than-later. You should avoid it by not overspending on depreciating assets. Instead focus of appreciating ones like real estate or stock.

7. Over Expenditure

Young adults are known to love the finer things in life. Live in the leafy suburbs, drive posh cash, take frequent holidays to the Caribbean, dress in designer clothes and much more. But, good living comes at a cost at times too dear to pay.

You will be forced to take-up more credit card debt or loans to sustain this lifestyle leading to you being broke. You can however dig yourself out from the debt claws by strictly following a budget and living within your means.

8. Lack of Saving

Are you aware that 33% of American households have an annual income of $75,000? However, do you know that they live on paycheck to paycheck? A whopping 73% of the US population has less than 1,000 in savings?.

You probably fall in the above statistics and this is mainly because of not saving for a rainy day. You will be forced to incur more debt when an emergency happens, which will leave you broke. You can turnaround the debt trap or brokenness by embracing the saving mentality. Start small and increase your savings as time goes by.

9. Bad Mindset

Avoiding being broke starts with having a positive mindset. At times, this entails making sacrifices and not trying to match up to your clique, colleagues or implied status.

Brian Fourman, a personal finance expert states that money success is just 20% head knowledge and 80% is willingness to change. You should be willing to sacrifice the comfort of a new car and hang on to your old but functional jalopy, or take a local vacation instead of visiting overseas.

10. Divorce

Let’s face it, divorce has been on the rise and is affecting couples of all ages, both the young and old. The cases are quite costly as you have to settle the lawyer’s fee, split your earnings, take-up part of your partner’s debt and also pay for child support. All the expenses you used to split will fall on both of your shoulders, which means you’ll have less money left over each month.

Although divorce is never anticipated, you can safeguard yourself by trying to settle the matter amicably, or operating a savings account that will take care of any legal expenses.


There you have it; some of the key reasons why you are always broke. You have too much debt or too many credit cards. You constantly pay medical bills from your pocket or party too much. The student loan or divorce settling is taking big proportion of your income. Or you never budget and overspend.

However, you can still come out from the financial distress by taking the right measures. For instance, you may move to a smaller house, cut your entertainment spending, consolidate your debts, get new insurance or strictly follow a budget.

Since now you have an idea of why you’re broke, how about taking drastic measures today? Not tomorrow, the day after or next week, but right now.





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